Direct sellers urged to sort out their tax affairs

HM Revenue & Customs (HMRC) has launched a campaign aimed at around 400,000 people involved in direct selling, to help them understand their tax obligations. Marian Wilson head of HMRC Campaigns explains.

Our latest campaign focuses on the growing number of people involved in direct selling - sometimes referred to as “agents”, “consultants”, “representatives” or “distributors” for the companies whose products they sell - who trade directly to customers without the need for a shop. 

Direct selling can involve demonstrating products at a party, door to door sales or simply selling to friends or relatives. And like other forms of selling, people need to pay tax on the profits.

We recognise that people come into direct selling from different backgrounds and that many have not been in business before. So the focus of this campaign is on helping the people involved understand their tax obligations now (commission, declaring earnings from a second income etc) and for the future.

Time-limited opportunity 

The campaign will also act as a time-limited opportunity for those who have got behind with their affairs to pay the tax, duties and interest they owe and benefit from lower penalties available. 

The Direct Selling campaign began on 26 September 2012 and customers who are behind with their affairs will have until 28 February 2013 to disclose what they owe and pay.

Penalty of no more than 10 per cent

Those who make a full disclosure will be offered a simple and straightforward way to put their tax affairs right, and may not be charged a penalty at all, with most receiving a penalty of no more than 10 per cent.

It’s better for direct sellers to come to us before we approach them. After 28 February, HMRC will use the information it holds to identify customers who have not paid what they owe. Substantial penalties or even criminal investigation could follow.

Throughout the campaign, we are there to provide customers with information and guidance to help them decide if the campaign applies to them. See our web pages here

Those who sell financial products will not be covered under this campaign. Equally, the campaign is not aimed at those who started direct selling after 6 April 2011, although, because they too need to be aware of their tax obligations, they can read our guidance and where necessary easily find out how to register with HMRC.